A Corporation Reports Sales of $4,000,000,variable Costs of $500,000,fixed Operating

question 143

Multiple Choice

A corporation reports sales of $4,000,000,variable costs of $500,000,fixed operating costs of $1,250,000,and interest expense of $350,000.The corporation's EBIT is $3,250,000 and its marginal tax rate is 30%.If the corporation is able to increase its sales by 25%,then

• A) its EBIT will increase by 25% and its EPS will increase by 25%.
• B) its EBIT will increase by more than 25% and its EPS will increase by less than 25%.
• C) its EBIT and EPS will both increase, but less than 25% due to fixed costs and taxes.
• D) its EBIT will increase by more than 25% and its EPS will increase by more than the percentage increase in EBIT.

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Definitions:

Double Approach/Avoidance

A conflict involving a choice between two goals, each with both appealing and unappealing aspects.

Avoidance/Avoidance

A conflict situation where an individual must choose between two negative or undesirable options, leading to stress or anxiety.

Approach/Approach

A conflict situation where an individual must choose between two desirable options or outcomes.

Precipitating Causes

Events or situations that trigger or initiate a response, often related to the onset of a psychological disorder or an episode of illness.